Online Loan Harassment and Interest‑Rate Regulation in the Philippines: A Comprehensive Legal Primer
(updated as of 18 April 2025)
1 | Overview
The explosion of smartphone–based “online lending apps” (OLAs) has created a new frontier for consumer credit—and for abuse. Borrowers complain of relentless text‑blasts to their entire contact list, threats of public shaming on social media, and interest charges that balloon far beyond the principal.
This primer consolidates—without Internet sources—everything a Philippine lawyer, compliance officer, or layperson needs to know about (a) what counts as harassment, and (b) how Philippine law sets and polices loan pricing.
2 | Regulatory and Statutory Architecture
| Enforcer | Key Issuances | Core Mandate |
|---|---|---|
| Securities and Exchange Commission (SEC) | • Financing Company Act (Rep. Act 8556, 1998) | |
| • Lending Company Regulation Act (Rep. Act 9474, 2007) | ||
| • SEC Memorandum Circular (MC) 18‑2019 – Prohibition on Unfair Collection Practices | ||
| • SEC MC 19‑2019, MC 02‑2021, MC 10‑2022 – penalties, disclosure rules, and OLA registration | Licenses and disciplines all non‑bank lenders and their collection agents. | |
| Bangko Sentral ng Pilipinas (BSP) | • New Central Bank Act (Rep. Act 7653, as amended) | |
| • BSP Circular 1098‑2020 (caps on credit‑card pricing, now at 3 % per month interest; 1 % per month finance charge) | ||
| • BSP Circular 1166‑2023 (pilot ceiling for “buy‑now‑pay‑later”—effective cap: 15 % of principal, all‑in, per month) | May set ceilings for banks, e‑money issuers (EMIs), digital banks, and “specialized consumer‑credit products.” | |
| National Privacy Commission (NPC) | • Data Privacy Act (Rep. Act 10173, 2012) | |
| • NPC Circular 20‑01 – guidelines for online lenders’ data collection | Protects contact lists, photos, location data from misuse in collection tactics. | |
| Department of Justice / PNP Anti‑Cybercrime Group | • Cybercrime Prevention Act (Rep. Act 10175, 2012) – cyber‑libel, threats, identity theft | |
| • Anti‑Photo and Video Voyeurism Act (Rep. Act 9995) | Investigates criminal harassment executed through digital channels. | |
| Courts (Civil & Criminal) | • Art. 1956, Art. 1306 Civil Code – freedom to stipulate interest, subject to public policy | |
| • Art. 1229 Civil Code – court may reduce “iniquitous or unconscionable” stipulations | ||
| • Relevant jurisprudence (see § 4.3) | May annul or reduce interest; award damages for abusive collection. |
Finally, Rep. Act 11765 (Financial Products and Services Consumer Protection Act, 2022) overlays the whole system with conduct‑of‑business duties—fair treatment, transparency, and a single‑point complaints mechanism.
3 | Interest‑Rate Regulation
3.1 The Usury Law… and Its Suspension
Act No. 2655 placed ceilings (12 %‑for‑secured / 14 %‑for‑unsecured) but Central Bank Circular 905‑1982 “suspended” them. Suspension is not repeal; therefore, courts may still strike down rates as unconscionable under Art. 1229.
3.2 Benchmarked Ceilings Today
| Product | Issuing Body | Legal Basis | Current Cap (as of 2025) |
|---|---|---|---|
| Credit Cards | BSP | Circular 1098 (2020) + Periodic reviews | 3 % interest p.m. + 1 % financing charge; ₱200 fee cap on late payments |
| Buy‑Now‑Pay‑Later & Small‑Value Digital Loans | BSP | Circular 1166 (2023) pilot | 15 % of principal per month (interest + any fees) |
| Micro‑finance NGO loans | Microfinance NGOs Act (RA 10693) | Implementing Rules, SEC/BSP | “Cost of borrowing” ≤ 2.5 % per month (30 % effective annual) |
| All other private loans (financing, lending, peer‑to‑peer) | Courts (ex‑post review) | Art. 1229 CC; jurisprudence | No ex‑ante cap; but courts routinely reduce rates >36 % p.a. |
3.3 Landmark Cases That Curb Excessive Interest
* Medel v. CA, G.R. 131622 (27 Nov 1999): 66 % p.a. on credit‑line voided as shockingly iniquitous.
* Spouses Cruz v. Spouses Bancom, G.R. 165411 (10 Nov 2015): 5 % per month reduced to legal rate.
* Nacar v. Gallery Frames, G.R. 189871 (13 Aug 2013): reset legal interest at 6 % p.a. (judgments and forbearance).
Courts now treat anything beyond 24 %–36 % p.a. as presumptively unconscionable, absent a sophisticated borrower or extraordinary risk.
4 | Unfair Debt‑Collection and Harassment
4.1 SEC Memorandum Circular 18‑2019 (Unfair Collection)
Applies to all financing and lending companies and their third‑party collectors. Prohibited acts include:
- Calling or sending messages outside 6 :00 a.m.–10 :00 p.m.
- Threats of violence, arrest, or criminal suit without basis.
- Use of profane language or slurs.
- “Contact‑blasting”: notifying borrowers’ contacts, posting on social media, or creating group‑chats to shame debtors.
- False representations (e.g., impersonating a lawyer/agency).
Violators face fines ₱25 000 – ₱1 000 000 per count, suspension or revocation of certificate of authority, and endorsement to DOJ for criminal prosecution.
4.2 Data‑Privacy Intersection
Many OLAs require READ CONTACTS, CAMERA, or STORAGE permissions. Under the Data Privacy Act:
- Purpose must be proportionate (NPC Advisory Opinion 2017‑63).
- Borrower’s freely given, informed, and specific consent is required; blanket “I agree” does not legitimize contact‑blasting.
- NPC may award actual and moral damages; fines up to ₱5 million per act.
4.3 Cyber and Penal Offences
| Conduct | Possible Charge | Penalty Range |
|---|---|---|
| Posting borrower’s nude photos or forged “Wanted” posters | RA 9995 + Art. 287 RPC | prision correccional + up to ₱500 000 |
| Public Facebook shaming with false statements | Cyber‑libel (RA 10175) | prision mayor + ₱1 million fine |
| Repeated threatening messages (“we will send police”) | Grave Threats (Art. 282 RPC) | arresto mayor → prision correccional |
| Endless ringtone spam | Unjust Vexation (Art. 287 RPC) | arresto menor / fine |
5 | Remedies and Enforcement Workflow
- Document every SMS, Viber, Messenger, or e‑mail (screenshots with time‑stamp).
- Send a demand letter (registered mail or e‑mail) invoking MC 18‑2019 and Art. 1229, proposing a restructured amortization at legal interest.
- If harassment persists:
- File an SEC complaint (Corporate Governance and Finance Department). SEC can issue a Cease‑and‑Desist Order (CDO) within 48 hours for prima facie cases.
- File an NPC complaint for privacy breaches (online portal).
- Swear a police blotter / cybercrime complaint; attach evidence.
- Optional civil suit:
- Collection with consignation—deposit amount you admit owing, pray the court (i) voids excess interest, (ii) awards damages.
- Small Claims (A.M. 08‑8‑7‑SC) if ≤ ₱400 000 (since 2022). No lawyer needed.
- Report hot‑apps to Google Play / Apple App Store. Both require compliance with local law; dozens of OLAs have been delisted on SEC request.
6 | Obligations of Online Lenders
- Registration & Capital: minimum paid‑in capital—₱10 million (lending) / ₱10‑20 million (financing).
- Certificate of Authority must be displayed on‑app and on website.
- Truth‑in‑Lending Act (RA 3765) + BSP/SEC IRR: annual percentage rate (APR), total cost of credit, due dates must be presented before the borrower clicks “agree”.
- AML‑CFT compliance: KYC, suspicious transaction reports for ₱50 000 single‑transaction threshold (unless covered by separate e‑money rules).
- RA 11765: internal dispute‑resolution in 15 business days; mandatory link to the regulator’s complaints portal.
Failure in any of these may ground a borrower’s defense of illegality/unenforceability under Art. 1409 Civil Code.
7 | Emerging Issues (2024‑2025)
- Salary‑Advance and BNPL products now fall under BSP’s pilot cap; full Circular expected Q4 2025.
- House Bill 6772 and Senate Bill 1846 seek to “reinstate” the Usury Law with a flat 36 % p.a. ceiling. As of April 2025 they are at committee stage.
- AI‑driven credit scoring triggers explainability duty under RA 11765 § 18: borrowers may demand “meaningful information about the logic involved.”
- Cross‑border OLAs: SEC coordinates with IOSCO and requests app‑store geo‑blocking; extradition challenges persist.
8 | Practical Tips for Borrowers
- Check the SEC list of registered lending companies (updated weekly).
- Read the permissions an app wants; deny READ CONTACTS unless essential.
- Borrow small, repay fast—most apps charge per‑day interest.
- When harassed, respond in writing: “Please communicate only at this number/email during 8 a.m.–5 p.m., weekdays.”
- Negotiate—many collectors accept 60 %‑80 % lump‑sum or stretched amortization once you cite MC 18‑2019.
- Preserve evidence; do not delete chats.
- Seek legal aid: PAO takes consumer cases when harassment is present.
9 | Policy Recommendations
- Codify a universal rate cap for small‑value, short‑term loans (≤ ₱50 000) at 24 % p.a., indexed to inflation.
- Empower SEC to summarily block domains and IPs of rogue OLAs (modeled on Anti‑Online Sexual Abuse CSAM blocking).
- Expand NPC’s fining powers—current ₱5 million ceiling is too low for venture‑funded fintechs.
- National mediation platform for consumer credit disputes (leveraging e‑Court and OADR).
- Promote responsible lending accreditation so legitimate apps stand out in app stores.
10 | Conclusion
Philippine law already supplies a robust tool‑kit—SEC circulars, BSP ceilings, the Data Privacy Act, the Cybercrime statute, and age‑old Civil‑Code doctrines—to curb abusive online lenders. The immediate challenge is enforcement at scale and public awareness. Until Congress enacts broader rate‑caps, courts and regulators will continue to police unconscionable interest and harassment on a case‑by‑case basis. Armed with the knowledge above, borrowers and practitioners can demand accountability—and responsible fintech innovation can thrive.